A study of 246 large listed companies links furlough support in 2020 to higher chief executive pay the following year.
Researchers analysed executive pay from 2019 to 2023 at 246 companies from the FTSE 350, comparing firms that received furlough support with those that did not. For companies that used the scheme in 2020, chief executives had significantly higher total remuneration and performance-related pay in the immediate post-pandemic year.
The researchers describe income gained through opportunities created by public policy as “elite welfare.” They argue that examining this kind of support alongside conventional welfare can shed light on how government policy relates to inequality and the distribution of income.
How executive pay changed
Among firms that received furlough support in 2020 only, chief executives had a significant increase in total remuneration in the immediate post-pandemic year compared with executives at firms that did not receive support. The significant increase was concentrated in performance-related pay; there were no significant effects on basic salary, pensions, or benefits and other payments.
The researchers found no significant effects on CEO remuneration for firms that received support in both 2020 and 2021. They also found no significant effects on chief financial officer remuneration among firms supported in 2020 only, although basic salary increased significantly for CFOs at firms supported in both years. No statistically significant effects were found in the second year after support, suggesting that the CEO effects were not sustained or delayed.
Why elite welfare matters
The findings suggest that a public scheme intended to support companies during the pandemic was associated with higher performance-linked pay and total pay for some chief executives soon afterward. The researchers use this result to develop the idea of “elite welfare”: income or advantages captured by a small, privileged group through opportunities enabled by government policy.
They argue that treating elite welfare as part of social policy could help researchers examine how public spending and policy may support both people facing economic insecurity and groups in powerful economic positions. The paper presents this as a framework for studying the relationship between public policy, inequality, and the distribution of wealth and income.
Evidence and caveats
The study used a difference-in-differences analysis of executive remuneration at 246 FTSE 350 companies, with data covering 2019 to 2023. This approach compared changes over time between firms that received furlough support and those that did not; it was not a randomized experiment.
The sample included companies that consistently reported executive-pay and financial data and excluded firms without sufficient data, including some companies with no UK operations, some collective investment vehicles, and firms with fewer than 250 employees. The reported remuneration effects were limited to the immediate post-pandemic year, and the excerpts do not show significant longer-term effects.
